Market participants are increasingly purchasing downside protection as Bitcoin’s value remains volatile. According to cryptocurrency exchange Deribit, ETF holders and corporate treasuries are acquiring put options to safeguard their investments against potential price drops below $60,000.
Jean-David Péquignot, the chief commercial officer at Deribit, noted that these investors are opting for six-month and one-year put options, which allow them to sell Bitcoin at $60,000 even if market prices fall significantly lower. This strategy serves as a form of insurance, helping to mitigate losses while they maintain a long-term investment outlook.
The interest in $60,000 puts has surged, with open interest reaching $1.50 billion, marking the highest level across all options on Deribit. The exchange dominates the global crypto options market, accounting for nearly 80% of its activity. This uptick in demand reflects growing concerns that any potential price rebounds may be short-lived, leading to further declines.
Notably, ETF holders and corporate treasuries control a substantial amount of Bitcoin. In recent years, investors have funneled billions into U.S.-listed spot Bitcoin ETFs, which have collectively seen inflows of approximately 1.26 million BTC, or about 6% of the total circulating supply. Publicly traded companies also hold around 1.14 million BTC, representing 5.7% of the supply.
Currently, Bitcoin is trading below $70,000, having recently dipped to around $60,000 earlier this month. As of now, it is priced near $67,500, having gained nearly 5% since Wednesday. However, the options market indicates a cautious sentiment, with put options trading at a notable premium compared to call options.
Péquignot pointed out that despite the recent price increase, the 25-delta risk reversal remains elevated, showing that investors are prioritizing downside protection over bullish bets. He also mentioned that volatility could increase if prices fall below $63,000, as market makers may need to sell additional assets to maintain a balanced exposure, potentially exacerbating downward price movements.
In related news, a prediction market on Polymarket has raised concerns about potential insider trading. At least 12 wallets reportedly profited over $1 million by betting on the outcome of an investigation led by ZachXBT before it was publicly disclosed. Analysts suggest that a cluster of newly created wallets placed significant bets on Axiom, the firm implicated in the investigation, indicating possible advance knowledge of the findings.
- The Polymarket prediction market saw about $40 million in volume before Axiom was named as the target of the investigation.
- On-chain analysts have highlighted suspicious betting patterns that suggest insider information may have influenced the trades.
- Due to the lack of identity checks on Polymarket and prior knowledge of the investigation among Axiom employees, tracing any insider betting could prove challenging.
As Bitcoin's price fluctuates, investors are increasingly buying put options to protect against potential declines below $60,000. This trend reflects growing concerns about market volatility and the long-term outlook for cryptocurrency investments.
Source: CoinDesk